Last week brought some hope that this year’s election would have a stronger policy focus. The OECD released its report on the state of the New Zealand, and the moves necessary to improve outcomes in education, productivity and economic growth.
Though media attention quickly turned to Todd Barclay's dictaphone and Labour's foreign interns, it is worth looking back to the OECD’s report, and its recommendations.
Every two years, the OECD casts its analytic eye over the policy and performance of its members. This year’s report highlights New Zealand’s poor productivity performance, despite strong growth in real GDP. Labour productivity has lagged, and New Zealand remains well below the average of the top half of the OECD.
New Zealand’s productivity performance continues to disappoint. In the long run, productivity determines wages, so improving productivity performance is critical for improving standards of living.
Though New Zealand’s policy settings overall are among the best in the world, the penalties attached to being small and distant seem to have worsened. And so the OECD focuses on the policy areas where New Zealand lags, and can usefully improve.
New Zealand’s overseas investment regime hinders investment. Even New Zealand construction icon Fletchers’ finds itself hindered by overseas investment rules because of its ownership structure. The OECD recommends progressively loosening those restrictions.
Where the Initiative’s report on Special Economic Zones recommended investment liberalisation for councils willing to try better rules, the OECD recommends liberalising on a sector-by-sector basis.
The OECD also points to the pernicious effects of urban land supply rules on economic growth. And, mirroring the findings of a host of Initiative reports, the OECD concludes that the problem stems from poor incentives facing local councils.
Making economic growth be in councils’ best interest would not only help end the housing crisis, it would also help encourage stronger business growth.
The Initiative’s study tour to Switzerland made abundantly clear the difference that strong incentives can make, as Roger Partridge explains in our second column this week.
And where New Zealand’s poor productivity performance has sometimes been blamed on high rates of immigration, the OECD reinforces the importance of the international connections that migrants bring.
We hope that the weeks to come are able to turn back from foreign interns and dictaphones to policy. The issues facing New Zealand are too important to be left to the sidelines.